The Stock Market Is Soaring but These 2 Stocks Are Still Dirt Cheap Buys
Earlier this month, the S&P 500 hit a record high of more than 6,000 for the first time ever. Based on that, you might assume that stocks may be too expensive to buy right now as the average stock in the index is trading at more than 25 times earnings. However, there are still many deals out there.
Two stocks that could be among the best bargains right now include AbbVie (NYSE: ABBV) and Comcast (NASDAQ: CMCSA).
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Drugmaker AbbVie isn’t having a great year, but it’s not having a bad one, either. Its year-to-date gains totaled a modest 7% as of Monday’s close. That’s decent, but it’s nowhere near the S&P 500’s more impressive 23% rally.
For a while, the stock was outperforming the broad index. However, things went sideways for AbbVie recently after the company reported last week that its schizophrenia drug, emraclidine, failed to meet its primary endpoint in a phase 2 clinical trial. Emraclidine seems to have had the potential to be a blockbuster drug for AbbVie, and investors didn’t take the news lightly, dumping the stock afterward.
For a diverse business like AbbVie, that is by no means crippling to its operations or long-term outlook. In its most recent quarter, for the period ending Sept. 30, the company reported $14.5 billion in revenue, which grew by nearly 4% year over year — and that includes a 37% decline in Humira, which recently lost patent protection. AbbVie’s diverse business spans immunology, oncology, aesthetics, neuroscience, and eye care.
Yet, investors generally recognize that the company is no pushover. Abbvie has historically proven itself to be a growing business. While the pharmaceutical business is inherently risky, and failures will probably show up in Abbvie’s pipeline of drug therapies, that itself isn’t a reason to turn bearish on what’s still a top stock to buy and hold. Eventually, the risk-reward profile is too good to ignore.
AbbVie is facing a slowdown right now but the company expects that in 2025 it will “return to robust growth” and that through until the end of the decade, it will grow by high-single digits per year. And while Humira has lost patent protection, the company has effectively replaced that revenue with Skyrizi and Rinvoq, two immunology drugs which it believes will combine for higher peak revenue than its popular rheumatoid arthritis treatment.
For investors looking to play the long game, this sell-off can be an opportune time to buy AbbVie on weakness as it trades at a forward price-to-earnings (P/E) multiple of 14, which looks dirt cheap for such a great growth stock.
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